IMN East Coast Data Center Conference
Presenters at the IMN East Coast Data Center Conference in New York May 28-29 emphasized a healthy financing environment and expectations for long-term data growth, and they said a more rational approach to capacity could result in relative pricing stability, at least in retail colocation.
Overall Demand Remains Healthy
Corporate use of third-party data center services continues to increase because of the economic benefits of outsourcing and rising demand for data-intensive services, resulting in favorable growth prospects across the entire data center industry. “Everything is moving and growing, but some companies are moving faster; some are growing faster,” a data infrastructure executive said.
Prices Stabilizing -- or at Least Not Falling as Fast
A more rational approach to expansion has resulted in a better balance between supply and demand across most of the country. “The overcapacity of two years ago has mostly disappeared,” a speaker said. On the other hand, increased retail competition from traditionally wholesale-focused vendors such as Digital Realty Trust Inc. has resulted in price pressure -- often with Digital’s own tenants. “We’ve always competed with Digital because we’re in some of their facilities,” a data center executive said. “But we’re competing a lot more directly now. It’s affected the civility of the conversation.”
AWS Positioned for Growth
Enterprises are increasingly turning to the benefits of the cloud (scalability and price flexibility) and moving beyond fears of insufficient security. “Companies now realize that cloud security is better than what they have in-house,” a speaker said. This is a change from just a few months ago. The first choice for many customers tends to be Amazon.com Inc.'s Amazon Web Services, while Microsoft Corp.'s cloud services also are seen as important for enterprise customers. A speaker said, “Ten or 15 years from now, it could be that everything will be on the cloud. The jury’s still out.” OpenStack is not expected to offer significant competition due to AWS’s head start.
Cloud Services Not Cannibalizing Colocation
Overall industry growth is benefiting all data center vendor types, including industry leaders such as Equinix Inc. and Digital Realty Trust, midsized and smaller data center vendors and cloud-based providers such as AWS. Although smaller companies and startups are more likely to outsource data services to the cloud rather than to colocation, this trend is not yet being seen among larger enterprise accounts. “We’re not seeing much cannibalization from colo to cloud,” a data center vendor said, and another noted the rising importance of hybrid solutions. “Colo is a gateway drug for managed services and the cloud,” this source said. “A company that starts with a colo-only solution will generally start to look at additional services by the end of the first billing cycle.”
Industry Consolidation Expected
Strong growth prospects and readily available capital are resulting in a healthy environment for startups, mergers and acquisitions. While growth prospects are favorable for most data center vendors, the trend is for economies of scale. “When the dust settles, the data center industry will likely be dominated by three or four companies,” a speaker said.
